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Ciena rebounds on unbeat presentation

    Ciena's shares raced ahead 10 percent Thursday even though the company made no announcements. Its upbeat tone at an investment conference today coupled with some analyst notes had investors assuming current earnings projections were on track.

    Analysts and investors made a reverse interpretation of a new trend in which companies have been issuing warnings ahead of investment conferences to keep up with The U.S. Security and Exchange Commission's Regulation FD (fair disclosure). Since Ciena (Nasdaq: CIEN) didn't issue any statement before its appearance at a Merrill Lynch conference, analysts assumed it meant the company was doing well.

    That reassured investors who had lumped Ciena in with other optical-equipment stocks Monday, sending its shares down 21 percent on that day alone. It fell along with Juniper Networks (Nasdaq: JNPR) and ONI Systems (Nasdaq: ONIS)--other fiber-optic firms who got slashed in Salomon Smith Barney's sweeping cuts to estimates for telecommunication equipment suppliers. Ciena shares had revived $4.56 to $57.94 on Thursday.

    Ciena manufactures and develops optical networking systems for telecommunications networks and services.

    In a research note from Merrill Lynch Thursday, the investment firm noted that in Ciena's upbeat presentation at its Global Communications Conference in New York Wednesday the company didn't change its outlook, and said that must be a sign that it's standing by its forecast.

    In mid-February, the company topped first-quarter earnings and revenue estimates. At that time CEO Patrick Nettles said he expected Ciena's business to continue to grow faster than the overall market, and the company raised revenue projections for 2001.

    The company's business looks as strong now as it did six months ago, quite an achievement considering how its competitors, like Nortel (NYSE: NT), have issued multiple downward revisions to their forecasts.

    Ciena's saving grace has been the fact that it installs 80 percent to 90 percent of its equipment, so it knows how much customer inventory there is, according to the Merrill report.

    The company also mentioned during its presentation that six to 10 of its clients are performing enough work to total 10 percent of revenue each, a good sign for Ciena's diversity and ability to determine results, according to the research brief.

    ABN AMRO analyst Kenneth Leon also lauded Ciena in a research note Thursday.

    "We believe the Company has been gathering strong momentum since last March," Leon wrote. He has been tracking customer wins, and said the company has an "open field running," with its CoreDirector intelligent optical switch winning 90 percent of contracts over its competitors in the last 12 months.

    Lehman Brothers analyst Steven Levy also put out a positive report on the company Wednesday after a tire-kicking tour of the company.

    Levy said the company had a strong ability to predict revenue across new and existing product lines at the end of last quarter, and none of Ciena's customers has cancelled or delayed orders in the past few months.

    "Our conclusion today is the same as it was one month ago; Ciena's fundamentals couldn't be stronger," Levy wrote.

    The stock may have gotten some extra mileage out of a report in Thursday's The Wall Street Journal that said Nortel's pain may be Ciena's gain. The article said Ciena has been making several sales wins over Nortel and other optical-equipment suppliers.